Topic 11 Consolidation - Other issues - Australian School...

Australian
School of
Business
Topic 11
Consolidation: Other
issues

Australian
School of
Business
Consider the following group structure:
P
T
S
70%
60%
• P controls S and S controls T
• S and T are both subsidiaries of P
• P would have to consolidate S and T into the one
group
NCI
S
30%
NCI
T
40%
Direct and indirect
non-controlling interest

Australian
School of
Business
•
This structure requires the recognition of:
•
DNCI – direct non-controlling interest
•
INCI – indirect non-controlling interest
•
The interests of all parties in this group are summarised as follows :
Direct and indirect
non-controlling interest
S T
Parent Interest Direct
Indirect
Total
Non-controlling Interest
Direct
Indirect
Total
Total ownership interests
70 % -
- 42 % (70% x 60%)
70% 42%
30 % 40 %
- 18% (30% x 60%)
30% 58%
100% 100%

Australian
School of
Business
•
2 x pre-acquisition elimination entries
•
NO change to format of consolidation journals
re:
•
BCVR
• pre-acquisition elimination
•
elimination of intragroup transactions
•
HOWEVER calculation of NCI share of equity
changes from the last chapter
Impact of multiple subsidiaries
(and INCI) on consolidation

Australian
School of
Business
The major consideration in performing a
consolidation with indirect non-controlling interests is
to distinguish between:
Pre acquisition equity of the subsidiary
These amounts are only allocated to the DNCI
(STEP 1)
AND
Post acquisition movements of equity of the subsidiary